New Savings Plans for Disabled

The US Congress passed the ABLE Act in December, which created a 529A account to provide tax advantaged benefits for disabled individuals. The 529A is a special savings account for disabled people and families with children who have special needs. The funds can be invested and grow tax-free. Stay tuned for rules to be finalized and states to roll out the plans. 

What's New? Rollover Chart

Click here for a summary of allowable transfers to and from various employer plans and IRAs.

Proposed Amendments to RESPA and TIL

The Consumer Financial Protection Bureau (CFPB) is proposing amendments to certain mortgage servicing rules regarding force-placed insurance notices, policies and procedures, early intervention, and loss mitigation requirements under Regulation X's servicing provisions; and periodic statement requirements under Regulation Z's servicing provisions. 

The proposed amendments may be found in the Federal Register, here.

What's New? Notice of Wage Rates Repealed

A new law will no longer require employers to provide annual notices to employees under a provisions that make changes to the Wage Theft Protection Act. See Laws Regulating Wages and Hours (New York State) in The Gold Book.

What's New? NY and NJ Minimum Wage Rates Increase

In New York the minimum wage rate increases to $8.75 on December 31, 2014 (read more in The Gold Book.)

In New Jersey the minimum wage rate increases to $8.38 on January 1, 2015 (read more in The Gold Book.)

Last Month's Q&A Answered

The following question appeared in the Q&A section of Banking Spectrum's Report Bulletin last month. Compare your answer to the correct answer below:

Q: A customer applied for a $10,000 HELOC with us.  His credit and other underwriting criteria are good.  He has also brought at lawsuit against the bank claiming that we allowed an unauthorized person in his business to improperly write checks and withdraw funds from the business account while he was in the hospital.  We do not feel comfortable making him this loan.  How should we handle this?

A:  One approach is to deny the credit but find a basis for denial other than his credit qualifications.  Remember the 4 C's of credit, and “character” is one of them.  This might require a bit of creativity in completing the adverse action form.  Another approach to consider is why not grant the HELOC application, a gesture of good will, not a lot of money, not a credit risk to the bank, and it might just help you settle this case.

Tax-Free Transfers to Charity Permitted

Certain owners of individual retirement arrangements (IRAs) may be eligible to make tax-free transfers to charity.

IRA owners age 70½ or older have until Wednesday, Dec. 31 to make a direct transfer of part or all of their IRA distributions to an eligible charity.

The Tax Increase Prevention Act, enacted Dec. 19, extended for 2014 the provision authorizing these qualified charitable distributions (QCDs). The provision had expired at the end of 2013. With this retroactive renewal, any eligible IRA distribution during 2014 properly transferred to a qualified charity counts as a QCD.

As a result, older IRA owners may have a different way to give to charity and amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution (RMD).

Read more on the IRS website. 

New Single Distribution Rules for Pension Plans

IRS Notice 2014-54, issued September 18, 2014, provides that all disbursements from a retirement plan scheduled to be made at the same time are treated as a single distribution even if they are sent to multiple destinations. 

As a result of this notice, taxpayers with pretax and after-tax amounts in their plan, for example, can transfer through direct rollovers the pretax portion of the distribution (including earnings on after-tax amounts) to a traditional IRA and the after-tax portion of the distribution to a Roth IRA.  (Previous interpretations allowed accomplishing this result through 60-day rollovers but not direct rollovers.)  The guidance provided in Notice 2014-54 applies only to distributions from qualified plans described in section 401(a) of the Code (such as profit-sharing and 401(k) plans), section 403(b) plans and section 457(b) governmental plans.  The guidance in Notice 2014-54 is generally effective January 1, 2015; however, transitional rules included in the guidance permit taxpayers to utilize the new rules provided in the guidance prior to the effective date. 

The guidance in Notice 2014-54 does not apply to distributions from IRAs.   

Learn more here on the IRS website. 

What's New? Bank size criteria for CRA

The federal bank regulatory agencies announced the annual adjustment to the asset-size thresholds used to define small bank, small savings association, intermediate small bank, and intermediate small savings association under the Community Reinvestment Act (CRA) regulations. See The Gold Book for details.

IRS Revises Standard Mileage Rates for 2015

The Internal Revenue Service has issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

• 57.5 cents per mile for business miles driven, up from 56 cents in 2014
• 23 cents per mile driven for medical or moving purposes, down half a cent from 2014 
• 14 cents per mile driven in service of charitable organizations

Last Month's Q&A Answered

The following question appeared in the Q&A section of Banking Spectrum's Report Bulletin last month. Compare your answer to the correct answer below:

Q: We are offering a special CD that we shall advertise in the newspaper.  Must we advertise the rules for the renewals for this CD product?

A:  No.  See CFPB Regulation 1030.8.  When you review CFPB regulations, not only under Regulation DD, but the other regulations, you may see different language and new provisions that were not contained in the original Federal Reserve Board regulations prior to the transfer of regulatory jurisdiction for consumer regulation to the CFPB.  Do not assume that all the language in the former Federal Reserve Board regulations has been carried over to the CFPB regulations.

What's New? Amendment to RMD Rules.

The Treasury Department amended the required minimum distribution rules under section 401(a)(9) of the Internal Revenue Code to provide that longevity annuities purchased with IRA assets no longer need to begin payments by age 70-1/2 as long as the annuity contract meets the definition of a “qualifying longevity annuity contract” (QLAC.) Instead the value of these annuities is excluded from the account balance used to calculate an individual’s RMD and distributions may be delayed until the individual reaches age 85.

This amendment is effective immediately.

See Longevitiy Annuities in The Gold Book for details.

What's New? FATCA amendment to FCRA.

Enacted in 2010, the Foreign Account Tax Compliance Act (FATCA) is effective July 1, 2014.  It requires foreign financial institutions to report on the U.S. owned accounts held with them to the Internal Revenue Service.  If they do not, the foreign institutions face a 30% withholding on their US based source income.  Read more about FATCA here. 

Assessments: Final Rule

The FDIC Board of Directors recently adopted the Assessments Final Rule. The Final Rule revises the FDIC's risk-based deposit insurance assessment system to reflect changes in the regulatory capital rules that go into effect in 2015 and 2018. For deposit insurance assessment purposes, the Final Rule will: (1) revise the ratios and ratio thresholds relating to capital evaluations, (2) revise the assessment base calculation for custodial banks, and (3) require that all highly complex institutions measure counterparty exposure for assessment purposes using the Basel III standardized approach in the regulatory capital rules. There are two effective dates for item (1): January 1, 2015, and January 1, 2018. The effective date for items (2) and (3) is January 1, 2015.

Additional information may be found on the FDIC website at: http://www.fdic.gov/news/news/financial/2014/fil14057.html

Revised BSA/AML Exam Manual Available

The Federal Financial Institutions Examination Council (FFIEC) recently released the revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual.

The revised manual reflects the FFIEC's ongoing commitment to incorporate guidance issued since 2010 into one manual for the FFIEC agencies' examination staff. The manual benefits depository institutions by providing information to help ensure compliance with the BSA and safeguard operations from money laundering and terrorist financing.

The revised manual may be found on the FFIEC BSA/AML Infobase at http://www.ffiec.gov/bsa_aml_infobase/default.htm.

FDIC Documentation Procedures for State Chartered Banks

The FDIC issued a set of documentation procedures for state-chartered banks that engage in activities permissible for national banks. To do so, a state bank must maintain documentation in its own files that the OCC allows the activity for national banks and that the state bank is satisfying any restrictions the OCC has placed on that activity.

Fair Lending Caution

The CFPB issued a bulletin warning that probing for details on a potential borrower’s Social Security disability benefits violates the Equal Credit Opportunity Act and Regulation B. Pressing too far on the details of a disability raises fair lending risks, the bureau reported. 

FDIC Videos Address Mortgage Compliance

The FDIC has released of the first of three new technical assistance videos developed to assist bank employees in meeting regulatory requirements. The videos will address compliance with certain mortgage rules issued by the CFPB. The first video covers the Ability to Repay and Qualified Mortgage rule, and is intended for compliance officers and staff involved in ensuring the bank’s mortgage lending operations comply with CFPB rules.

Americans with Disabilities Court Action

The Justice Department recently entered into a Settlement Agreement with Ahold U.S.A., Inc. and Peapod, LLC (Peapod), the owners and operators of www.peapod.com, to remedy alleged violations of the Americans with Disabilities Act (ADA). The agreement resolves the Department’s allegations that www.peapod.com is not accessible to some individuals with disabilities, including individuals who are blind or have low vision, are deaf or hard of hearing, and individuals who have disabilities affecting manual dexterity. Under the agreement, Peapod will adopt measures to ensure that users with disabilities are able to fully and equally enjoy the various goods, services, facilities, and accommodations provided through www.peapod.com, including: conforming the website and mobile applications to, at minimum, the Web Content Accessibility Guidelines 2.0 Level AA Success Criteria (WCAG 2.0 AA), except for certain third party content; designating a Web Accessibility Coordinator; adopting a Web Accessibility Policy; soliciting customer feedback on how website accessibility can be improved; providing automated and user website and mobile application accessibility testing; and training Peapod’s website content personnel on website accessibility.

We thought this was interesting reading and considerations for banks to identify website accessability and accommodations may be warranted.

What's New? IRS Releases 2015 Pension Plan Limitations

The Internal Revenue Service announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. 

For a summary of limitations from 2008 through 2015 see Cost of Living Adjustments for Pension Plans. 

Each of the following chapters in The Gold Book have been updated throughout for annual limitation adjustments:

• Traditional IRAs
• Roth IRAs
• SEP-IRAs
• SIMPLE-IRAs
• Keogh Plans
• Corporate Pension Plans